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Growth or stability? Using social risk preferences to guide industrial policy

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  • Andras Bethlendi
  • Christopher Stapenhurst

Abstract

Previous studies use portfolio theory to identify industrial policies that efficiently trade-off economic growth and stability. We incorporate social risk preferences to identify a unique optimal policy, and develop a new “ceteris paribus” policy simulation to select between different, possibly inefficient, polices. Using Hungarian data, we find that expanding the highest growth sectors is optimal for all plausible levels of risk aversion. If the society is relatively risk averse, then expanding some medium growth sectors is optimal too.

Suggested Citation

  • Andras Bethlendi & Christopher Stapenhurst, 2025. "Growth or stability? Using social risk preferences to guide industrial policy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 28(3), pages 263-280, July.
    • Handle: RePEc:taf:jpolrf:v:28:y:2025:i:3:p:263-280
    DOI: 10.1080/17487870.2025.2474050
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